I planned to use product filter (i.e.:filter by color) for my site for better user experience.But I was told this would affect my site's overall ranking.Is that true?Can anyone clarify to me?
no, i don't think so, it is going to affect your site ranking, but use the rel=cannonical tag in header section otherwise Google will treat both the pages as duplicate. or you could specify the "noindex" tag.
Good point Daniel, canonical can somehow protect your site from duplicates. Xenus, better if you can make the sorting internal within the body of your page and will not create new page to avoid dups.